This article was originally published on ETFTrends.com.
Vanguard, the second-largest U.S. issuer of exchange traded funds, said it has filed plans with the Securities and Exchange Commission to introduce the Vanguard Total World Bond ETF. The new ETF is expected to debut in the third quarter.
“The ETF will be the industry's first U.S.-domiciled index product offering investors access to the entire global investment-grade bond universe in a single portfolio,” according to a Vanguard statement.
Inside Vanguard's New ETF
Vanguard previously used the ETF of ETFs on one of its other bond ETFs. The Vanguard Total Corporate Bond ETF (VTC) debuted last year and holds the Vanguard Short-Term Corporate Bond ETF (VCSH) , Vanguard Intermediate-Term Corporate Bond ETF (VCIT) and Vanguard Long-Term Corporate Bond ETF (VCLT) .
“This structure enables the Vanguard Total World Bond ETF to achieve immediate scale by using existing exposure from the underlying ETFs and is expected to result in tighter bid/ask spreads and lower operating expenses than investing directly in the benchmark's constituents,” said Vanguard in the statement.
The new ETF will track the Bloomberg Barclays Global Aggregate Float Adjusted Composite Index. BND, which is one of the largest fixed income ETFs in the U.S., holds over 8,400 bonds and has an average duration of 6.1 years.
BNDX, which tracks the Bloomberg Barclays Global Aggregate ex-USD Float Adjusted RIC Capped Index, holds nearly 4,900 bonds and has an average duration of 7.9 years. That ETF is currency hedged.
“Vanguard research shows that currency-hedged global bond exposure provides diversification benefits that can reduce volatility and smooth returns over time,” said the issuer. “Two of the most important drivers of bond returns are interest rates and inflation, factors that fluctuate in other countries in patterns that have not historically been correlated with the United States or one another.”
The Total World Bond ETF will charge 0.09% per year, or $9 on a $10,000 investment.
For more information on the fixed-income market, visit our bond ETFs category.
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